Biz tax cut would lift GDP: METI

Japan’s gross domestic product would likely grow by at least ¥7 trillion if the effective corporate tax rate were to fall by about 10 points from the current level of around 35 percent, the industry ministry said in a recent survey.

The estimate comes amid government talks on cutting corporate taxes — a move Prime Minister Shinzo Abe is eager to make but which is unpopular with the Finance Ministry and the ruling party’s tax panel.

The Ministry of Economy, Trade and Industry sent questionnaires on the issue to 1,000 leading firms and drew its estimate from the 351 responses.

If corporate taxes are cut to “the international level,” which METI says is equal to a cut of about 10 points, combined domestic sales would rise by ¥6 trillion as firms moved to shift some overseas business back to Japan, the survey suggests.

Japan would then see GDP grow by ¥7 trillion with the addition of 690,000 jobs, it said.

Should tax rates stay at the current level, sales are projected to decline by ¥15 trillion as firms continue the shift overseas.

Of the responding firms, 275 said they operate abroad and about 56 percent said tax rates are affecting their decisions on whether to develop outside Japan.

Japan’s effective corporate income tax rates — consisting of national and local taxes — are about 35 percent, compared with 25 percent in China, around 24 percent in South Korea and 17 percent in Singapore, according to Finance Ministry data.